Exhibit
10.36


 


AGREEMENT TO CONVERT


 


This Agreement to Convert Senior Promissory Note into
Common Stock of AXCESS is made as of January 16, 2004, by and between AXCESS
International, Inc., a Delaware corporation (the “AXCESS”), and J.P. Morgan SBIC LLC (formerly
known as J.P. Morgan Investment Corporation), a Delaware corporation (“JP Morgan”).


 


RECITALS


 


A.           AXCESS issued to JP
Morgan a Senior Promissory Note (“Note”) originally entered on June 25, 1997 and amended
the last amendment was on April 12, 2002. The Note was due on December 31, 2003
and as of December 31, 2003 has an outstanding principal balance of $400,000.00
and unpaid interest thereon of $169,795.79.


 


B.             JP Morgan currently
holds 2 shares of AXCESS Series J Preferred Stock (“Series J”), and desires to convert shares
into Voting Common Shares of AXCESS as provided in Section 5 of the Certificate
of Designations, Preferences, Powers and Rights of Series J Preferred Stock.


 


C.             JP Morgan currently
holds 9 shares of AXCESS Series I Preferred Stock (“Series I”), and desires to convert shares
into Voting Common Shares of AXCESS as provided in Section 5 of the Certificate
of Designations, Preferences, Powers and Rights of Series I Preferred Stock.


 


D.            The Company has
proposed to restructure certain outstanding debts and obligations with its
creditors and debtors (the “Restructuring”).


 


E.              As part of and in
order to facilitate the Restructuring, the Company and JP Morgan desire to
enter into this Agreement to (i) convert Note, (ii) convert Series J, (iii)
convert Series I and (iv) set forth certain of the other terms and conditions
agreed upon in connection with the Restructuring.


 


AGREEMENT


 


NOW THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereto agree as follows:


 


1.                                       Conversion.  AXCESS and JP Morgan agree to convert Note,
Series I and Series J along with all unpaid interest and dividends into AXCESS
Common Stock as follows:


 


a.                           AXCESS
and JP Morgan agree to convert $569,795.79 owed to JP Morgan by AXCESS pursuant
to the Note and unpaid interest thereon into AXCESS Common Stock.  AXCESS, immediately upon the execution of
this Agreement, shall issue and deliver to JP Morgan 227,918 fully-paid and non


 

















 


assessable shares of the
Common Stock of AXCESS, and a certificate issued to JP Morgan evidencing the
issuance of such shares.


 


b.                          Upon
receipt of the aforementioned stock certificates, JP Morgan shall mark original
note paid in full and return to AXCESS along with a Letter of Transmittal
acknowledging Note has been paid in full and is cancelled.


 


c.                           JP
Morgan hereby directs AXCESS to issue 11,173 fully-paid and non-assessable
shares of the Common Stock of AXCESS in exchange for all currently held Series
J and unpaid dividends.  Upon receipt of
Series J Preferred Stock Certificate AXCESS shall issue a certificate to JP
Morgan evidencing the issuance of such shares.


 


d.                          JP
Morgan hereby directs AXCESS to issue 42,590 fully-paid and non-assessable
shares of the Common Stock of AXCESS in exchange for all currently held Series
I and unpaid dividends.  Upon receipt of
Series I Preferred Stock Certificate AXCESS shall issue a certificate to JP
Morgan evidencing the issuance of such shares.


 


2.                                       Registration          AXCESS agrees to include all 281,681
shares of Common Stock of AXCESS to be held by JP Morgan (the “Registrable
Shares”) following the execution of this agreement in the next SB-2
Registration Statement (or any other registration statement filed with the
Commission to register shares of Common Stock) filed by or on behalf of AXCESS
after the date hereof.  AXCESS will use
its best efforts to have the said registration statement filed with, and
declared effective by, the Securities and Exchange Commission no later than
June 30, 2004.  If such registration
statement is not declared effective by such date, AXCESS shall use its best
efforts thereafter to effectuate the effectiveness of such registration
statement.


 


a.               Preparation and
Filing If and when AXCESS is under an
obligation pursuant to the provisions of this agreement to use its best efforts
to effect the registration of any Registrable Shares, AXCESS shall, as
expeditiously as practicable:


 


1.               Furnish to JP
Morgan, at least five days before filing the registration statement that
registers such Registrable Shares, copies of all documents proposed to be filed
in connection with such registration and all amendments or supplements thereto;


 


2.               Prepare and file
with the Securities and Exchange Commission (the “Commission”) such amendments
and supplements to such registration statement used in connection therewith as
may be necessary to keep such registration statement effective for at least a
period of 90 days or until all of such Registrable Shares, have been disposed
of (if earlier) and to comply with


 


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the provisions of the
Securities Act with respect to the sales or other disposition of such
Registrable Shares;


 


3.               Promptly notify JP
Morgan in writing (i) of the receipt by AXCESS of any notification with respect
to any comments by the Commission with respect to such registration statement
or any amendment or supplement thereto or any request by the Commission for the
amending or supplementing thereof or for additional information with respect
thereto, (ii) of any receipt by AXCESS of any notification with respect to the
issuance by the Commission of any stop order suspending the effectiveness of
such registration statement or an amendment or supplement thereto or initiation
or threatening of any proceeding for that purpose and (iii) of the receipt by
AXCESS of any notification with respect to the suspension of the qualification
of such Registrable Shares for sale on any jurisdiction or the initiation or
threatening of any preceding for such purposes;


 


4.               Use its best
efforts to register or qualify such Registrable Shares under such other
securities or blue sky laws of such jurisdictions as the holders of such
Registrable Shares reasonably request and do any and all other acts and things
which may be reasonably necessary or advisable to enable such holders to
consummate the disposition in such jurisdictions of such holders’ Registrable
Shares;


 


5.               Provide a transfer
agent and registrar (which may be the same entity and which may be AXCESS) for
such Registrable Shares;


 


6.               Subject to all the
other provisions of this Agreement, use its best efforts to take all other
steps necessary to effect the registration of such Registrable Shares
contemplated hereby.


 


b.              Expenses       All expenses incurred by AXCESS in
complying with this agreement, including, without limitation, all registration
and filing fees (including all expenses incident to filing with the National
Association of Securities Dealers, Inc.) fees and expenses of complying with
the securities and blue-sky laws. Printing expenses, fees and expenses of
AXCESS’s counsel and accountants and reasonable fees and expenses of counsel to
JP Morgan (not to exceed $1,000.00), shall be paid by AXCESS.


 


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i.      Indemnification            


 


a.               In connection with
any registration of any Registrable Shares under the Securities Act pursuant to
this Agreement AXCESS shall indemnify and hold harmless the holders of
Registrable Shares, each underwriter, broker, or any person acting on behalf of
the holders of Registrable Shares, and each other person, if any, who controls
any of the foregoing persons within the meaning of the Securities Act against
losses, claims, damages or liabilities, joint or several (or actions in respect
thereof), to which any of the foregoing persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or allegedly untrue statement of a material fact contained in
the registration statement under which such Registrable Shares were registered
under the Securities Act, any preliminary prospectus contained therein or
otherwise filed with the Commission, any amendment or supplement thereto or any
document incident to registration or qualification of any Registrable Shares,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading or, with respect to any prospectus, necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, or any violation by AXCESS of the Securities Act or
state securities or blue sky laws applicable to AXCESS and related to action or
inaction required by AXCESS in connection with such registration or
qualification under such state securities or blue sky laws;  and shall reimburse the holders of
Registered Shares, such underwriters, such broker or such other person acting
on behalf of the holders Registable Shares and each such controlling person for
any legal or other expenses reasonably incurred by any of them in connection
with investigating or defending any such loss, claim, damage, liability or action.


 


b.              Promptly after
receipt by an indemnified party of notice of the commencement of any action
involving a claim referred to in this Section 2A-3, such indemnified party
will, if a claim in respect thereof is made against party, give written notice
to the latter of the commencement of such action.  The failure of any indemnified party to notify an indemnifying
party of such action shall not relieve the indemnifying party from any
liability in respect of such action that it may have to such indemnified party
on account of this Section 2A – iii.


 


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c.               If the
indemnification provided for in this Section 2A- iii is held by a court of
competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, claim, damage, liability or action referred to herein, then the
indemnifying party, in lieu of indemnifying such indemnified party hereunder,
shall contribute to the amounts paid or payable by such indemnified party as a
result of such loss, claim, damage, liability or action in such proportion as
is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the
statements or omissions which resulted in such loss, claim, or damage,
liability or action as well as any other relevant equitable
considerations,  The relative fault of
the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties’ relative intent, knowledge, access to
information and the opportunity to correct or prevent such statement or
omission.  The parties agree that it
would not be just and equitable if contribution pursuant hereto were determined
by pro rata allocation or by any other method or allocation which does not take
account of the equitable considerations referred to herein.  No person guilty of fraudulent
misrepresentation shall be entitled to contribution from any person.


 


3.                                       Securities
Act Legend; Registration Rights. 
The Securities issued in connection with this agreement will not be
registered under the Securities Act of 1933, as amended (the “Securities
Act”).  Certificates representing the
Registrable Shares shall bear a restrictive legend substantially to the effect
of the following only until such time as the Registrable Shares are registered
under a registration statement declared effective under the Securities Act:


 


THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
OR APPLICABLE STATE SECURITIES LAWS, OR THE SECURITIES LAWS OF ANY OTHER
JUSRISDICTION.  THEY MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENSE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THOSE
SECURITIES LAWS OR PURSUANT TO AN EXEMPTION THEREFROM.


 


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4.                                       Representations
and Warranties by AXCESS.  AXCESS
hereby represents and warrants to JP Morgan as follows:


 


a.               AXCESS
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has the corporate power and authority to
execute and deliver this agreement, to issue the Registrable Shares on the
basis described herein and otherwise to perform its obligations under this
agreement.


 


b.              The
execution and delivery by the AXCESS of this letter agreement, the issuance of
the Registrable Shares, and the performance by AXCESS of its obligations
hereunder, have been duly authorized by all requisite corporation action on the
part of AXCESS and will not (a) violate any provision of law, statute, rule or
regulation or any order of any court or other agency of government, (b)
conflict with or violate the Certificate of Incorporation or By-Laws of AXCESS,
in each case as amended, or (c) violate, conflict with or constitute (with due
notice or lapse of time or both) a default under any indenture, mortgage,
lease, license, agreement or other contract or instrument or result in the
creation or imposition of any lien, charge or encumbrance of any nature upon
the properties or assets of AXCESS or any of its subsidiaries, in the case of
clauses (a) and (c) if such violation, conflict, default, lien, charge or
encumbrance would have a material adverse effect on AXCESS.


 


c.               This
letter has been duly executed and delivered by AXCESS and constitutes the valid
and legally binding obligation of AXCESS, enforceable in accordance with its
terms, except to the extent the enforceability hereof may be limited by
applicable bankruptcy, moratorium or similar laws affecting the rights of
creditors generally.


 


d.              Based
in part upon the representations and warranties of JP Morgan by, any federal,
state or other governmental department, commission, board, bureau, agency, or
instrumentality or any third party is or will be necessary for the execution
and delivery of this agreement by AXCESS and the issuance of the Shares
hereunder, other that the filing of a notice of sale on Form D with the
Securities and Exchange Commission in accordance with the rules and regulations
thereof under the Securities Act


 


e.               The
Registrable Shares are duly authorized, validly issued, fully paid and
non-assessable shares of Common Stock and are not subject to any preemptive
rights.


 


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5.                                       Representations
and Warranties by JP Morgan.  JP
Morgan hereby represents and warrants to AXCESS as follows:


 


a.               JP
Morgan is acquiring the Registrable Shares for its own account, for investment
and not with a view to the distribution thereof within the meaning of the
Securities Act.


 


b.              JP
Morgan understands that the Registrable Shares have not been registered under
the Securities Act, by reason of their issuance by AXCESS in transactions
exempt from the registration requirements of the Securities Act, and that the
Registrable Shares must be held by JP Morgan indefinitely unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
such registration.


 


c.               JP
Morgan further understands that the exemption from registration afforded by
Rule 144 (the provisions of which are known to it) promulgated under the Securities
Act depends on the satisfaction of various conditions, and that, if applicable,
Rule 144 may afford the basis for sales only in limited amounts, after
compliance with the holding periods and other provisions thereof.


 


d.              JP
Morgan understands that its investment hereunder involves substantial risks and
represents and warrants that it has made such independent examinations and
investigations of AXCESS as it has deemed necessary in making its investment
decision, and JP Morgan further represents and warrants that it has had
sufficient access to the officers, directors, books and records of AXCESS as it
has deemed necessary to conduct such examination and investigation and make
such investment decision


 


e.               JP
Morgan is able to bear the economic risk of the investment contemplated by this
agreement and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the investment
contemplated by this agreement.


 


f.                 AXCESS
has timely filed with the Commission all forms, reports, schedules, statements
and other documents required to be filed since December 31, 2002 under the
Securities Exchange Act of 1934 (the “Exchange Act”) or Securities Act (such
documents as supplemented and amended since the time of filing, collectively,
the “SEC Documents”).


 


6.                                       Miscellaneous.


 


a.               This
letter agreement constitutes our entire agreement with respect to the subject
matter hereof.  This letter agreement
may not be modified or amended of any provision hereof waived except by an
instrument in writing signed by AXCESS and JP Morgan.


 


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b.              This
letter agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.  The rights of JP Morgan hereunder shall be
assignable to any other holder of the Registrable Shares.  Except as provided in the immediately
preceding sentence, this agreement and the rights of JP Morgan hereunder shall
not be assignable, and any purported assignment hereof or thereof shall be
void.  Notwithstanding anything to the
contrary set forth herein, AXCESS may not assign any of its rights or
obligations hereunder.


 


c.               This
letter agreement may be executed in any number of counterparts and on separate
counterparts, each of which shall be an original instrument, but all of which
together shall constitute a single agreement. 
One or more signature pages from any counterpart of this letter agreement
may be attached to any other counterpart of this letter agreement without in
any way changing the effect thereof. 
This letter agreement shall be effective when executed and delivered by
AXCESS and JP Morgan.


 


d.              All
notices, requests, demands, consents, waivers, or other communications made hereunder
to any party or holder of Registrable Shares shall be in writing and shall be
deemed to have been duly given if delivered personally or sent by
nationally-recognized overnight courier, facsimile or by first class registered
or certified mail, return receipt requested, postage prepaid, addressed to such
party at the address set forth below:


 


	
  AXCESS:

  	
  3208 Commander Drive

  
	
   

  	
  Carrollton, Texas 75093

  
	
   

  	
  Attention: 
  Chief Financial Officer

  
	
   

  	
  Facsimile No.: 
  972-407-9085

  
	
   

  	
   

  
	
  With a Copy to:

  	
  Craig G. Ongley

  
	
   

  	
  Vial, Hamilton, Koch & Knox, LLP

  
	
   

  	
  1700 Pacific Avenue, Suite 2800

  
	
   

  	
  Dallas, Texas 75201

  
	
   

  	
   

  
	
  JP Morgan:

  	
  J.P. Morgan Partners

  1211 Avenue of the Americas

  40th Floor

  New York, NY 10036

  Attention: Securities Management Group

  Facsimile No.: 646-792-6049

  



 


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given may have furnished to the other party in writing
in accordance herewith.  All such
notices, requests, demands, consents, waivers or other communications shall be
deemed to have been delivered (a) in the case of personal delivery, on the date
of delivery, (b) if sent by facsimile, on the date sender receives a
confirmation receipt, (c) if sent by overnight courier, on the next business
day following the date sent and (d) in the case of mailing, on the third
business day following such mailing


 


e.               Entire
Agreement.  This Agreement sets
forth the entire agreement of the parties hereto with respect to the subject
matter hereof.


 


f.                 Governing
Law.  This Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware.


 


 


IN WITNESS WHEREOF, the undersigned have executed this Agreement to
Convert as of the date first written above.


 


 


	
   

  	
  AXCESS
  INTERNATIONAL, INC.,

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Allan Frank

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Allan Frank

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  VP and CFO

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  J.P. Morgan SBIC LLC (f.k.a. J.P.
  Morgan

  Investment Corporation),

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Puneet Gulati

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Puneet Gulati

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President and Assistant Secretary

  	
   

  
							



 


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